Schwab Investors Escalated Trading Last Month

Clients of Charles Schwab up trading in January as the big retail brokerage firm reported an 8 percent increase in average daily trades from a year earlier.

NEW YORK -- Clients of Charles Schwab Corp.
ramped up trading in January as the big retail
brokerage firm on Thursday reported an 8 percent increase in
average daily trades from a year earlier and 5 percent higher
than in December.

The total included trades on which Schwab did not collect
commissions. Average daily trades on which it did receive
transaction-based revenue, a figure watched closely by analysts,
were up 12 percent from December. At the end of last year
nervous investors were shunning stock trading out of concerns
about budget problems in the United States and ongoing issues in
the Eurozone, according to brokerage firm executives industry
wide.

In January, Schwab clients made daily average trades of
504,700, the highest average in at least the last 12 months,
rising nearly 5 percent above December's average client trades
of 480,200. Schwab's online brokerage rivals earlier this week also
reported big jumps in client trading. The discount brokers are
often viewed as proxies for individual investor interest in the
stock market.

"Overall, today's activity update was largely in line with
our expectations and anti-climactic given similar peer reports,"
David Trone, an analyst at JMP Securities wrote in a note to
clients. Trone rates Schwab shares "market perform."

Daily average revenue trades at TD Ameritrade Holding Corp
in January rose 3 percent from a year ago and 17
percent from December. At E*Trade Financial Corp, daily
average revenue trades in January were up 6 percent from January
2012 and 18 percent from December.

Trading volume on U.S. stock exchanges in January was up 8
percent from December but down 7 percent from January 2012. Brokerage executives said that investors built up heavy cash
positions in December by selling businesses, real estate and
other holdings in anticipation of higher 2013 taxes and started
investing the cash in January.

Net new assets at San Francisco-based Schwab in January from
existing and new clients fell 49 percent from December to $12.1
billion but were up 70 percent from the amount collected in
January 2012. The inflow last month was bolsted by $2.2 billion
from a mutual fund clearing services client that Schwab did not
identify.

$2 TRILLION RECORD

Schwab's total client assets reached a firm-record $2.01
trillion at the end of January, up 16 percent from a year
earlier. The firm, the largest by market capitalization among online
brokers, ended January with 8,819 active brokerage accounts, up
3 percent from a year earlier. Late last year Schwab removed
30,000 brokerage accounts from those it considers active. Schwab's January trading metrics offered further evidence
that both individual investors and institutional money managers,
who trade through Schwab, pulled cash out of money-market funds
that pay virtually zero interest and redeployed them into mutual
funds.

Schwab clients pulled $6.0 billion from money-market funds
in January - reversing net inflows in the previous eight months.
They added a net $3.4 billion to taxable bond funds, $2.7
billion to international funds, $1.2 billion to hybrid funds and
$1.1 billion to large capitalization stock funds. January was
only the second month in the last 12 that investors put more
money into large-cap stock funds than they removed, according to
Schwab.

Despite the jump in January trading, investors' interest in
buying and selling stocks remains relatively low. "All the signs are there that the retail investor is coming
back into the market, but not robustly," TD Ameritrade Holdings
Chief Executive Fred Tomczyk said at the company's annual
meeting in Omaha, Nebraska on Wednesday.

At Schwab's business update meeting last week, Chief
Executive Walt Bettinger said trading is "not anywhere near the
levels that you might anticipate in history." Clients are
investing, he added, but not trading. Bettinger and other executives also have said that client
trading is becoming a less vital metric for the online brokers
because they are increasing their fee-based offerings that
produce revenue based on client assets.

Schwab also has been growing its bank subsidiary, with its
deposit accounts growing 1 percent in January to 874,000. Since
bank stocks trade at lower valuation than brokerage stocks, some
analysts have said that Schwab shares, which have produced a
total return of 39.2 percent over the last 12 months, may be
overvalued.